Siegel et al v. Ford

Filing
20

OPINION AND ORDER: re: 10 FIRST MOTION to Dismiss for Lack of Jurisdiction Improper Venue, Failure to State a Claim upon which Relief can be Granted, For a More Definite Statement, Because the Statute of Limitations has Expired, & For Forum Non Co nveniens filed by Don Ricardo Oniel Ford. For the foregoing reasons, Defendant's motion to dismiss is DENIED. Defendant shall file an answer to the complaint on or before October 5, 2017. The Clerk of Court is directed to close the motion at Docket Number 10. SO ORDERED. (Signed by Judge J. Paul Oetken on 9/15/2017) (ama)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
HARVEY SIEGEL and ROBERT
CORRAO,
Plaintiffs,
16-CV-8077 (JPO)
OPINION AND ORDER
-vDON RICARDO ONIEL FORD,
Defendant.
J. PAUL OETKEN, District Judge:
Plaintiffs Harvey Siegel and Robert Corrao bring this action against Defendant Don
Ricardo Oniel Ford for common law fraud and unjust enrichment. Plaintiffs allege that Ford
fraudulently induced them to enter into an option agreement to purchase the rights to his
invention, Eco-Fuel Saver (“Eco-Fuel”). Ford allegedly fraudulently misrepresented to Plaintiffs
that Eco-Fuel, a fuel additive, increases fuel efficiency and reduces emissions. (Dkt. No. 1
(“Compl.”) ¶ 1.) In addition, Ford allegedly misrepresented that a “worldwide market” already
existed for Eco-Fuel, and that he actually owned the rights to the product, despite having
previously transferred worldwide distribution rights to Eco-Fuel to third-party investors. (Id.)
Ford moves to dismiss Plaintiffs’ claims. For the reasons that follow, the motion is
denied.
I.
Background
The following facts are taken from the complaint and are presumed true for the purposes
of this motion.
Beginning in April 2014 and continuing through the summer of that year, Plaintiffs and
Ford repeatedly spoke by phone about Eco-Fuel’s effectiveness and the existence of a foreign
market for Eco-Fuel. (Id. ¶ 8). During such calls, Ford represented that he expected tens of
1
millions of dollars in sales across numerous countries, including the United States, Uruguay,
Mexico, China, India, Jamaica, Taiwan, Thailand, Cuba, Greece, Argentina, Canada, and
Mexico. (Id.)
On June 5, 2014, Ford sent Plaintiffs a copy of his patent for Eco-Fuel, in which he
claimed:
Mixed with the fuel employed by an engine in very small quantities, the fuel and
additive mixture results in an increase in available horsepower, improved torque,
and reduced fuel consumption, all while concurrently causing a substantial
reduction in pollutants and greenhouse gases from the exhaust from the burned fuel
. . . . Testing of the component additive invention herein has shown that engines
having the additive/carrier mixture mixed with the engines’ fuel, in the noted ratios,
have significantly decreased gas emissions in the exhaust from the engine, and also
have increased power with resulting mileage increases. Consequently, the addition
of the component additive invention herein, to the fuel of vehicles, will save money
over time, because of increased fuel efficiency, reduced costs for fuel, and fewer
repairs to the fuel and combustion systems of the engine.
(Id. ¶ 9.) In reliance on these representations as to Eco-Fuel’s effectiveness, Plaintiffs entered
into an option agreement to purchase Eco-Fuel on June 25, 2014. (Id. ¶ 11; Dkt. No. 11-1
(“Option Agreement”)). The Option Agreement gave Plaintiff an exclusive right to negotiate an
agreement to purchase the product in exchange for $300,000. 1 (Compl. ¶ 11; Option Agreement
at 5.) The Option Agreement also required Ford to make available to Plaintiffs any distribution
1
Ford takes issue with Plaintiffs’ characterization of this agreement as an “option
to purchase,” claiming it was “really a non-binding letter of intent.” (Dkt. No. 11 at 4 n.1.)
Although at the motion-to-dismiss stage, courts “generally may consider only the complaint and
any written instrument attached to [it],” the Court will consider the Option Agreement, which is
attached to Defendant’s motion to dismiss, because that document is incorporated into the
complaint by reference and “no dispute exists regarding [its] authenticity, accuracy, or
relevance.” Hutson v. Notorious B.I.G., LLC, No. 14 Civ. 2307, 2015 WL 9450623, at *2
(S.D.N.Y. Dec. 22, 2015).
The Option Agreement provides Plaintiffs with an exclusive right to negotiate, for which
the Plaintiffs allege they paid $300,000 in consideration. (Compl. ¶ 11; Option Agreement at 5.)
Beyond his own conclusory assertions, Ford offers no reason why such an agreement would be
non-binding.
2
agreements or testing reports pertaining to Eco-Fuel. (Compl. ¶ 12; Option Agreement at 4.)
Ford never provided any such distribution agreements or testing reports, and Plaintiffs allege that
none existed and that Ford had no basis for his claims about Eco-Fuel’s effectiveness. (Compl.
¶¶ 10, 12.) 2
After executing the Option Agreement, Plaintiffs retained an intellectual property
attorney and began to pursue financing to bring Eco-Fuel to market. (Id. ¶¶ 13‒14.) On July 14,
2014, at a meeting at Plaintiffs’ intellectual property lawyers’ office, Ford and his associate Ernie
Park represented that: (1) “Eco-Fuel was so priceless . . . [that its] intellectual property . . . had to
be protected in its destination markets”; (2) a market worth approximately $10 million existed
for the product in 2014 in Uruguay; and (3) the market value had grown to $50-100 million in
2015. (Id. ¶ 14.) Later in 2015, Plaintiffs confirmed that no such established market existed.
(Id.) In reliance on Ford’s misrepresentations, however, Plaintiffs expended an additional
$200,000 (id. ¶ 14), presumably as part of their efforts to bring Eco-Fuel to market.
On November 9, 2014, Ford provided Plaintiffs with a “Master List of Ongoing Business
Opportunities” (“Master List”), which set forth existing and prospective distribution
opportunities in numerous foreign countries. (Id. ¶ 15.) Based on this list and Ford’s previous
representations, Plaintiffs advanced him an additional $40,000 and continued to expend “tens of
thousands of dollars . . . engaging consultants, purchasing testing equipment, and travel[ing].”
(Id. ¶ 16.)
2
In his Reply, Ford disputes the factual allegation that he failed to provide these
testing results. (Dkt. No. 17 at 4.) In support of his assertion, he attaches 20 exhibits, including
e-mail correspondence between Plaintiff Siegel and himself. Unlike the Option Agreement, see
supra note 1, the Court may not consider these documents at the motion-to-dismiss stage because
they are neither matters of public record nor referenced in the complaint. See Hutson, 2015 WL
9450623, at *2. Contrary to Ford’s argument, the Court must take all of Plaintiffs’ well-pleaded
allegations as true in ruling on this motion to dismiss.
3
Because they never received testing results from Ford, despite repeated requests,
Plaintiffs eventually arranged for testing at “CNR, the largest public research institute in Italy.”
(Id. ¶ 18.) The testing indicated that Eco-Fuel produced no measureable increase in efficiency.
(Id.) Ford blamed the poor results on “testing errors,” and promised to travel to Italy to
investigate and correct those errors. (Id.) He never did so. (Id.)
In or about February 2015, Ford engaged the Maine Maritime Academy to test Eco-Fuel.
(Id. ¶ 19.) It also found no measurable improvement in fuel efficiency or reduction in emissions.
(Id.)
Plaintiffs eventually became aware of a lawsuit in Canada arising from Ford’s sale of the
worldwide rights to distribute Eco-Fuel and its derivate products to Rainmaker Ventures, Inc.
(Id. ¶ 20.) The alleged sale occurred prior to the negotiations between Ford and Plaintiffs. (Id.)
Plaintiffs filed a complaint against Ford on October 15, 2016, asserting two common law
causes of action: fraud and unjust enrichment. (Id. ¶¶ 21‒28.) Ford moves to dismiss on several
grounds pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), 12(b)(3), 12(b)(6), and
12(e). (Dkt. No. 10.)
II.
Standing 3
A.
Legal Standard
To survive a Rule 12(b)(1) motion to dismiss, a plaintiff “must allege facts that
affirmatively and plausibly suggest that it has standing to sue.” Amidax Trading Grp. v.
S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011) (citation omitted). “[W]here, as here, the
3
Although styled as a motion to dismiss for failure to state a claim pursuant to
Federal Rule of Civil Procedure 12(b)(6), Ford argues that Plaintiffs do not have Article III
standing, which is properly asserted under Rule 12(b)(1). See, e.g., Mazzocchi v. Windsor
Owners Corp., No. 11 Civ. 7913, 2013 WL 5295089, at *4 (S.D.N.Y. Sept. 17, 2013) (“Motions
to dismiss for lack of standing are decided under Rule 12(b)(1) of the Federal Rules of Civil
Procedure.”).
4
case is at the pleading stage and no evidentiary hearings have been held, . . . we must accept as
true all material facts alleged in the complaint and draw all reasonable inferences in the
plaintiff’s favor.’” Sharkey v. Quarantillo, 541 F.3d 75, 83 (2d Cir. 2008) (second and third
alterations in original) (quoting Merritt v. Shuttle, Inc., 245 F.3d 182, 186 (2d Cir.2001)). “[I]n
resolving a motion to dismiss for lack of standing, ‘general factual allegations of injury resulting
from the defendant’s conduct may suffice,’ but ‘a plaintiff cannot rely solely on conclusory
allegations of injury or ask the court to draw unwarranted inferences in order to find standing.’”
Gambles v. Sterling Infosystems, Inc., 234 F. Supp. 3d 510, 516 (S.D.N.Y. 2017) (citation
omitted) (first quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992)) (second quoting
Baur v. Veneman, 352 F.3d 625, 636–37 (2d Cir. 2003)). “A court ‘may consider affidavits and
other materials beyond the pleadings to resolve the jurisdictional issue, but [a court] may not rely
on conclusory or hearsay statements contained in the affidavits.’” Id. (alteration in original)
(quoting J.S. ex rel. N.S. v. Attica Cent. Sch., 386 F.3d 107, 110 (2d Cir. 2004)).
B.
Discussion
“[A]ny person invoking the power of a federal court must demonstrate standing to do so.
This requires the litigant to prove that he has suffered a concrete and particularized injury that is
fairly traceable to the challenged conduct, and is likely to be redressed by a favorable judicial
decision.” Hollingsworth v. Perry, 133 S. Ct. 2652, 2661 (2013) (citing Lujan, 504 U.S. at 560–
61 (1992)).
Ford argues that Plaintiffs do not have standing because the Option Agreement identified
“American Energy Trust, LLC [(‘AET’)] or its assignee” as the “Purchaser,” not Plaintiffs.
(Dkt. No. 11 at 17.) In other words, Plaintiffs have not established that they, rather than AET,
have suffered a concrete and particularized injury. Plaintiffs respond that AET was “never
5
formed[,] and it was only contemplated as the entity that would acquire Eco Fuel if the option
was exercised.” (Dkt. No. 12 at 15; see also Dkt. No. 13 (“Siegel Decl.”) ¶ 12.) Therefore,
Siegel and Corrao were the only parties to suffer an injury. (Dkt. No. 12 at 15.)
Plaintiffs have adequately alleged facts to support standing. According to Plaintiffs, AET
does not actually exist, and would only have been created if they decided to exercise their option
to purchase Eco-Fuel. Cf. AdsOn5th, Inc. v. Bluefin Media, Inc., No. 16 Civ. 143, 2017 WL
2984552, at *7 (W.D.N.Y. July 13, 2017) (concluding a plaintiff did not have standing to bring a
contract claim where the contract referred to another “specific corporation” that actually existed).
The Option Agreement, into which Plaintiffs allege they were fraudulently induced to enter, was
written by Siegel, in the first person “[o]n behalf of American Energy Trust, LLC,” and identifies
Siegel as the managing member of AET. 4 (Option Agreement at 1, 8.) Cf. AdsOn5th, 2017 WL
2984552, at *8 (“[T]here is the far-more-convincing evidence that Payz Online Inc.—and not the
plaintiff—actually was corresponding with the defendants, sending them invoices, and seeking
payment based on the terms of the contract. . . . The letters and forms all relate to whether the
defendants should withhold tax when making payments to Payz Online Inc. [The plaintiff] is not
mentioned in these documents . . . .” (footnoted omitted)). 5 The evidence, including the Option
4
The allegations in the complaint as to Plaintiff Corrao’s involvement are sparse.
Nonetheless, the Court determines they are sufficient to support standing, especially in light of
Siegel’s averments that Corrao was his “business partner” and that Corrao paid $150,000 to Ford
as consideration for the option to purchase Eco-Fuel. (Siegel Decl. ¶¶ 3, 5.)
5
The fact that AET is not mentioned in the caption of the complaint is irrelevant to
whether Plaintiffs have constitutional standing. See Top Form Mills, Inc. v. Sociedad Nationale
Industria Applicazioni Viscosa, 428 F. Supp. 1237, 1241 n.2 (S.D.N.Y. 1977) (“[W]hether or not
Societa is in fact ‘doing business as Snia Viscosa’ is a matter which is not decided by plaintiff’s
choice of caption in his complaint.”).
6
Agreement itself, is sufficient to establish that Plaintiffs suffered a concrete and particularized
injury resulting from Ford’s alleged fraudulent misrepresentations.
Defendant’s motion to dismiss for lack of standing is denied.
III.
Personal Jurisdiction
A.
Legal Standard
“On a [Rule] 12(b)(2) motion to dismiss for lack of personal jurisdiction, plaintiff bears
the burden of showing that the court has jurisdiction over the defendant. Prior to discovery, a
plaintiff may defeat a motion to dismiss based on legally sufficient allegations of jurisdiction,”
i.e., a prima facie showing of jurisdiction. Machkour v. Espices W. 70th Corp., No. 11 Civ. 688,
2011 WL 6288006, at *3 (S.D.N.Y. Dec. 14, 2011). On a Rule 12(b)(2) motion, “a court may
consider matters outside the pleadings without converting the motion to dismiss into a motion for
summary judgment.” Hsin Ten Enter. USA, Inc. v. Clark Enters., 138 F. Supp. 2d 449, 452
(S.D.N.Y. 2000). Moreover, a court will “credit a plaintiff’s averments of jurisdictional facts as
true.” Machkour, 2011 WL 6288006, at *3 (quoting In re Magnetic Audiotape Antitrust Litig.,
334 F.3d 204, 206 (2d Cir. 2003)). “A court will not, however, ‘draw argumentative inferences
in the plaintiff’s favor.’” Id. (quoting In re Terrorist Attacks on Sept. 11, 2001, 538 F.3d 71, 93
(2d Cir. 2008)). “In deciding Rule 12(b)(2) motions, a court is not bound to accept as true a legal
conclusion couched as a factual allegation.” Id. (quoting Jazini v. Nissan Motor Co., 148 F.3d
181, 185 (2d Cir. 1998)).
B.
Discussion
“In both diversity and federal question cases, personal jurisdiction in federal court is
determined by the laws of the forum state.” Id. (citing Bensusan Restaurant Corp. v. King, 126
F.3d 25, 27 (2d Cir. 1997)). “Accordingly, the Court must engage in a ‘two-part analysis.’ First,
the Court must look to the relevant jurisdictional statute of the state in which it sits: New York.”
7
Facchetti v. Bridgewater Coll., No. 14 Civ. 10018, 2015 WL 3763970, at *1 (S.D.N.Y. June 16,
2015) (citation omitted) (quoting Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171
F.3d 779, 784 (2d Cir. 1999)). “Then, ‘[i]f the exercise of jurisdiction is appropriate under that
statute, the [C]ourt must decide whether such exercise comports with the requisites of due
process.’” Id. (alternations in original) (quoting Whitaker v. Am. Telecasting, Inc., 261 F.3d 196,
208 (2d Cir. 2001)).
1.
Specific Personal Jurisdiction
New York’s long-arm statute establishes specific personal jurisdiction over a nondomiciliary who: (1) “transacts any business within the state or contracts anywhere to supply
goods or services in the state”; (2) “commits a tortious act within the state” (except defamation
of character); or (3) “commits a tortious act [besides defamation of character] without the state
causing injury to person or property within the state.” 6 N.Y. C.P.L.R. § 302(a). Plaintiffs
contend that personal jurisdiction over Ford is statutorily authorized pursuant to all three
avenues. The Court concludes that personal jurisdiction is proper under § 302(a)(1) because
Ford transacted business within the state. Therefore, it need not reach Plaintiff’s alternative
arguments.
“A defendant transacts business within the meaning of § 302(a)(1) when it purposefully
‘avails itself of the privilege of conducting activities [in New York], thus invoking the benefits
and protections of its laws.’” Minnie Rose LLC v. Yu, 169 F. Supp. 3d 504, 513–14 (S.D.N.Y.
2016) (alteration in original) (quoting Fischbarg v. Doucet, 880 N.E.2d 22, 26 (N.Y. 2007)).
6
In order to establish personal jurisdiction based on a tortious act committed
without the state, a plaintiff must also show that the non-domiciliary (i) “regularly does or
solicits business, or engages in any other persistent course of conduct, or derives substantial
revenue from goods used or consumed or services rendered, in the state,” or (ii) “expects or
should reasonably expect the act to have consequences in the state and derives substantial
revenue from interstate or international commerce.” N.Y. C.P.L.R. § 302(a)(3).
8
“Section 302(a)(1) is a ‘single act’ statute: ‘[P]roof of one transaction in New York is sufficient
to invoke jurisdiction, even though the defendant never enters New York, so long as the
defendant’s activities here were purposeful and there is a substantial relationship between the
transaction and the claim asserted.’” Id. at 514 (alteration in original) (quoting Kreutter v.
McFadden Oil Corp., 522 N.E.2d 40, 43 (N.Y. 1988)). “To determine whether a party has
‘transacted business’ in New York, courts must look at the totality of circumstances concerning
the party’s interactions with, and activities within, the state.” Bank Brussels Lambert, 171 F.3d
at 787. “Rule 302(a)(1) jurisdiction ‘requires only a minimal quantity of activity, provided that it
is of the right nature and quality.’” Sills v. Ronald Reagan Presidential Found., Inc., No. 09 Civ.
1188, 2009 WL 1490852, at *6 (S.D.N.Y. May 27, 2009) (quoting Manhattan Life Ins. Co. v.
A.J. Stratton Syndicate (No. 7821), 731 F. Supp. 587, 592 (S.D.N.Y. 1990)).
Here, the totality of the circumstances alleged establishes that Ford purposefully created a
business relationship with Siegel, a New York resident. Ford’s business relationship with
Plaintiffs began in April 2014 and continued for at least ten months. (Compl. ¶¶ 8, 19.) During
that period, Ford traveled to Manhattan to meet with Siegel “at least three times.” (Siegel Decl.
¶ 8.) Ford does not dispute that he traveled to New York for business purposes. (See Dkt. No.
17 at 6‒7; Dkt. No. 18 (“Ford Decl.”)). Furthermore, Ford admits that, on February 15, 2014, he
“sent 36 five-ounce bottles of Eco-Fuel Saver[] to Siegel at no charge,” because he believed
Siegel was a “potential distributor.” (Ford Decl. ¶ 13.) Plaintiffs also claim that they repeatedly
discussed the allegedly misrepresented testing results and foreign markets for Eco-Fuel over the
phone with Ford, “as many as three times a day,” starting in April 2014. (Comp. ¶ 8.) Finally,
the scope of the alleged business relationship between the parties was substantial: Plaintiffs
9
claim to have paid $340,000 to Ford directly and expended and additional $200,000 in pursuit of
their investment in Eco-Fuel. (Compl. ¶ 22).
Considering the totality of the circumstances alleged, the Court concludes that Ford
purposefully transacted business in New York, and specific personal jurisdiction is proper under
N.Y. C.P.L.R. § 302(a). 7 See Minnie Rose, 169 F. Supp. 3d at 513–14 (determining that a
purposeful business relationship was created where: parties had a five-year business relationship,
including $1.4 million in commission payments; Defendant came to New York to discuss
business on three occasions and regularly communicated over e-mail and telephone; Defendant
made monthly shipments of clothing to Plaintiff in New York; and Defendant sent allegedly
fraudulent invoices to Plaintiff in New York); see also Three Five Compounds, Inc. v. Scram
Techs., Inc., No. 11 Civ. 1616, 2011 WL 5838697, at *10 (S.D.N.Y. Nov. 21, 2011) (“[C]ourts
in this district have found personal jurisdiction where parties’ communications were part and
parcel of an extended relationship involving multiple transactions or the provision of services
over multiple years.”). 8
2.
Constitutional Personal Jurisdiction
“Having found that § 302(a)(1) confers jurisdiction over Defendants, the Court must
examine whether its assertion of personal jurisdiction comports with due process.” Minnie Rose,
169 F. Supp. 3d at 515. “Due process demands that defendants have ‘certain minimum contacts
with [the forum state] such that the maintenance of the suit does not offend traditional notions of
7
Because the Court concludes the specific personal jurisdiction is authorized by
New York’s “long-arm statute,” it need not address whether it has general personal jurisdiction
over Ford.
8
The Court sees no reason why a substantial business relationship that lasted eight
months, rather than a period of years, and involved multiple meetings in New York and phone
conversations in which Ford allegedly made fraudulent misrepresentations to a New York
plaintiff, would not similarly support personal jurisdiction under N.Y. C.P.L.R. § 302(a).
10
fair play and substantial justice.’” Id. (quoting Int’l Shoe Co. v. Wash., 326 U.S. 310, 316
(1945)). “The due process inquiry has two parts: (1) ‘the court must determine whether the
defendant has sufficient contacts with the forum state to justify the court’s exercise of personal
jurisdiction,’ and (2) ‘the court must determine whether the assertion of personal jurisdiction is
reasonable under the circumstances of the particular case.’” Id. (quoting Schottenstein v.
Schottenstein, 04 Civ. 5851, 2004 WL 2534155, at *7 (S.D.N.Y. Nov. 8, 2004)).
“The requisite ‘minimum contacts’ analysis ‘overlaps significantly’ with New York’s
§ 302(a)(1) inquiry into whether a defendant transacted business in the State.” Id. (quoting
Brown v. Web.com Grp., Inc., 57 F. Supp. 3d 345, 358 (S.D.N.Y. 2014)). Accordingly, based on
the above analysis under § 302(a)(1), the Court concludes that the “minimum contacts”
requirement is satisfied here. See id.
“Part two of the due process inquiry—the reasonableness of a Court’s assertion of
personal jurisdiction—depends on a consideration of ‘(1) the burden that the exercise of
jurisdiction will impose on the defendant; (2) the interests of the forum state in adjudicating the
case; (3) the plaintiff’s interest in obtaining convenient and effective relief; (4) the most efficient
resolution of the controversy; and (5) the interests of the state in furthering substantive social
policies.’” Id. (quoting Schottenstein, 2004 WL 2534155, at *8). Where, as here, a plaintiff has
made a threshold showing of minimum contacts, however, “a defendant must present a
compelling case that the presence of some other considerations would render jurisdiction
unreasonable.” Id. (quoting Bank Brussels Lambert, 305 F.3d at 129).
Ford has not presented a compelling case that it would be unreasonable for this Court to
assert personal jurisdiction over him. In contesting the reasonableness of such jurisdiction, Ford
merely disputes the veracity of Plaintiffs’ factual allegations regarding the existence of out-of-
11
state witnesses and whether any allegedly misleading statements before execution of the Option
Agreement occurred within New York. (Dkt. No. 17 at 7.) At this stage, however, the Court
takes the Plaintiffs’ “averments of jurisdictional facts as true.” See Machkour, 2011 WL
6288006, at *3 (quoting In re Magnetic Audiotape Antitrust Litig., 334 F.3d at 206).
The Court must next consider the five reasonableness factors. As to the first, even if the
Court credits Ford’s conclusory assertion that “it would impose a substantial burden for him to
litigate in New York” 9 (Dkt. No. 11 at 13), “a ‘generalized complaint[] of inconvenience’ . . . is
an insufficient basis upon which to defeat a finding of personal jurisdiction.” Melissa & Doug,
LLC v. LTD Commodities, LLC, No. 15 Civ. 8085, 2016 WL 4367975, at *5 (S.D.N.Y. Aug. 15,
2016) (alteration in original) (quoting Chloé v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158,
173 (2d Cir. 2010)). “Second, New York has a strong interest in adjudicating cases of alleged
fraud perpetrated against New York [plaintiffs].” Minnie Rose, 169 F. Supp. 3d at 516
(emphasis omitted). Third, Plaintiff Siegel has a “strong interest in efficiently adjudicating this
matter in New York.” Id. Fourth, litigation in California would not necessarily lead to a more
“efficient resolution of the controversy”: despite disputing Plaintiffs’ claim that they are not
aware of any witnesses besides Ford who reside in California (see Siegel Decl. ¶ 13), Ford only
identifies one additional potential witness who he claims resides in California (see Dkt. No. 17 at
7). Fifth, and finally, Ford “do[es] not assert, nor can the Court discern, any substantive social
policies that would be furthered” by requiring this case to be heard in California. See Minnie
Rose, 169 F. Supp. 3d at 516.
9
The Court is skeptical that any burden on Ford is actually substantial. See Minnie Rose,
169 F. Supp. 3d at 515–16 (“[T]he ‘conveniences of modern communication and transportation
ease what would have been a serious burden only a few decades ago.’”) (quoting Metro. Life Ins.
Co. v. Robertson-Ceco Corp., 84 F.3d 560, 573–74 (2d Cir. 1996)).
12
The Court concludes that its assertion of personal jurisdiction over Ford comports with
the dictates of due process. Accordingly, the motion to dismiss for lack of personal jurisdiction
is denied.
IV.
Venue
A.
Legal Standard
Ford moves to dismiss for improper venue pursuant to Federal Rule of Civil Procedure
12(b)(3). “In evaluating a motion to dismiss for improper venue under Rule 12(b)(3), the court
‘must accept the facts alleged in the complaint as true and construe all reasonable inferences in
the plaintiff’s favor.’” Cavu Releasing, LLC. v. Fries, 419 F. Supp. 2d 388, 394 (S.D.N.Y. 2005)
(quoting Dolson v. N.Y. State Thruway Authority, No. 00 Civ. 6439, 2001 WL 363032, at *1
(S.D.N.Y. Apr. 11, 2001)). “However, the plaintiff bears the burden of showing that venue is
proper in the forum district.” Id. “[C]ourts may consider materials outside the pleadings on a
motion to dismiss for improper venue.” Caremark Therapeutic Servs. v. Leavitt, 405 F. Supp. 2d
454, 457 (S.D.N.Y. 2005).
B.
Discussion
“Under 28 U.S.C. § 1391, venue is proper in any judicial district in which ‘a substantial
part of the events or omission giving rise to the claim occurred.’” Gruntal & Co. v. Kauachi,
No. 92 Civ. 2840, 1993 WL 33345, at *2 (S.D.N.Y. Feb. 5, 1993) (quoting 28 U.S.C. § 1391).
Here, Plaintiffs have adequately alleged that a substantial part of the events giving rise to
their claims occurred in this District. Specifically, Siegel avers that he had “numerous telephone
conversations with Ford” about Eco-Fuel’s efficacy and existing foreign distribution networks
from his office in Manhattan. (Siegel Decl. ¶ 3.) Venue is proper on the basis of these alleged
phone conversations alone. See Gruntal & Co., 1993 WL 33345, at *1–2 (concluding that venue
was proper in common law fraud action based on telephone calls during which allegedly
13
fraudulent representations were made, where one party to the calls was within the district during
calls). In addition to these calls, Ford allegedly sent several packages of Eco-Fuel and the patent
application to Siegel in New York, and he met with Siegel three “at least three times in
Manhattan.” (Siegel Decl. ¶ 8.) Because a substantial part of the action giving rise to Plaintiffs’
claim occurred in the Southern District of New York, the motion to dismiss for improper venue
is denied.
V.
Forum Non Conveniens
Ford also moves to dismiss “on the grounds of forum non conveniens.” (Dkt. No. 11 at
22.)
First, the Court notes that the common law doctrine of forum non conveniens is
inapplicable to the present case. 28 U.S.C. § 1404(a), which provides that “[f]or the convenience
of parties and witnesses, in the interest of justice, a district court may transfer any civil action to
any other district or division where it might have been brought or to any district or division to
which all parties have consented,” displaced “the common law doctrine of forum non conveniens
for transfers between United States district courts.” Capital Currency Exch., N.V. v. Nat’l
Westminster Bank PLC, 155 F.3d 603, 607 (2d Cir. 1998).
Second, even if the Court were to construe Ford’s motion to dismiss as a motion under
§ 1404(a) to transfer to (an unidentified district) in California, it concludes that the standard
under that statute is not satisfied. Under § 1404(a), “the ‘threshold question,’ when determining
whether transfer is appropriate, is whether the action could have been brought originally in the
transferee forum.” Berger v. Cushman & Wakefield of Pennsylvania, Inc., No. 12 Civ. 9224,
2013 WL 4565256, at *3 (S.D.N.Y. Aug. 28, 2013) (quoting Atl. Recording Corp. v. Project
Playlist, Inc., 603 F. Supp. 2d 690, 695 (S.D.N.Y. 2009)). “After a court determines that the
14
action could have been permissibly brought in the transferee forum within the strictures of 28
U.S.C. § 1391(b), it then must examine whether convenience and the interests of justice warrant
a transfer.” Id. (footnote omitted) (citing Eslworldwide.com, Inc. v. Interland, Inc., No. 06 Civ.
2503, 2006 WL 1716881, at *3 (S.D.N.Y. June 21, 2006)). This inquiry is guided by several
factors:
(1) the plaintiff’s choice of forum, (2) the convenience of witnesses, (3) the location of
relevant documents and relative ease of access to sources of proof, (4) the convenience of
parties, (5) the locus of operative facts, (6) the availability of process to compel the
attendance of unwilling witnesses, and (7) the relative means of the parties.
Id. (quoting New York Marine & Gen. Ins. Co. v. Lafarge N. Am., Inc., 599 F.3d 102, 112 (2d
Cir. 2010)). “To this basic structure, other factors have been added to reflect a careful balancing
among the interests at stake in a given litigation.” Id.; see also Everlast World’s Boxing
Headquarters Corp. v. Ringside, Inc., 928 F. Supp. 2d 735, 743 (S.D.N.Y. 2013) (“Assessing
whether transfer is a valid exercise of discretion requires the Court to balance various factors: (1)
the convenience of the witnesses; (2) the convenience of the parties; (3) the location of relevant
documents and the relative ease of access to sources of proof; (4) the locus of operative facts; (5)
the availability of process to compel the attendance of unwilling witnesses; (6) the relative means
of the parties; (7) the forum’s familiarity with the governing law; (8) the weight accorded the
plaintiff’s choice of forum; and (9) trial efficiency and the interests of justice.”).
Here, Ford’s motion fails at the threshold because he has not met his burden to establish
that this action could have been brought in another district under 28 U.S.C. § 1391(b). “It is well
settled that ‘the burden is on the defendant, when it is the moving party to establish that there
should be a change of forum.’” Elite Parfums, Ltd. v. Rivera, 872 F. Supp. 1269, 1271
(S.D.N.Y. 1995) (quoting Factors Etc., Inc. v. Pro Arts Inc., 579 F.2d 215, 218 (2d Cir. 1978)).
Presumably, venue might be proper in some district in California, the state in which Ford
15
allegedly resides. (Compl. ¶ 7.) But Ford does not specifically identify this district. (See Dkt.
No. 11 at 22–23.)
The motion to “dismiss on forum non conveniens” grounds or to transfer under § 1404(a)
is therefore denied.
VI.
Failure to State a Claim
Ford also appears to argue that Plaintiffs’ claims should be dismissed for failure to state a
claim under Federal Rules of Civil Procedure 12(b)(6) and 9(b), although he styles this argument
as a “motion to dismiss for a more definite statement” under Rule 12(e). 10 (Dkt. No. 11 at 18.)
A.
Legal Standard
“In considering a motion to dismiss for failure to state a claim, the Court accepts as true
all allegations in the complaint and draws all reasonable inferences in Plaintiff’s favor.”
Guerrero v. City of New York, No. 16 Civ. 516, 2017 WL 2271467, at *1 (S.D.N.Y. May 23,
10
“Rule 12(e) provides ‘[i]f a pleading to which a responsive pleading is permitted is so
vague or ambiguous that a party cannot reasonably be required to frame a responsive pleading,
the party may move for a more definite statement before interposing a responsive pleading.’” In
re European Rail Pass Antitrust Litig., 166 F. Supp. 2d 836, 844 (S.D.N.Y. 2001) (quoting Fed.
R. Civ. P. 12(e)). “Rule 12(e) applies only in limited circumstances”:
The pleading must be sufficiently intelligible for the district court to make out one or
more potentially viable legal theories on which the claimant might proceed; in other
words, the pleading must be sufficient to survive a Rule 12(b)(6) motion to dismiss. At
the same time, the pleading also must be so vague or ambiguous that the opposing party
cannot respond to it, even with a simple denial as permitted by Rule 8(b), with a pleading
that can be interposed in good faith or without prejudice to himself.
Pelman ex rel. Pelman v. McDonald's Corp., 396 F. Supp. 2d 439, 443 (S.D.N.Y. 2005)
(citing 5C Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure § 1376 at 311
(3d ed.2004)).
For the same reasons given below for denying Ford’s motion to dismiss for failure to
state a claim, his motion for a more definite statement is also denied.
16
2017) (citing Cleveland v. Caplaw Enters., 448 F.3d 518, 521 (2d Cir. 2006)). “To survive a
motion to dismiss, the complaint must plead ‘enough facts to state a claim to relief that is
plausible on its face.’” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A
claim has facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.
(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)) (internal quotation marks omitted).
“To state a claim for fraudulent misrepresentation under New York law ‘a plaintiff must
show that (1) the defendant made a material false representation, (2) the defendant intended to
defraud the plaintiff thereby, (3) the plaintiff reasonably relied upon the representation, and (4)
the plaintiff suffered damage as a result of such reliance.’” Eternity Glob. Master Fund Ltd. v.
Morgan Guar. Tr. Co. of N.Y., 375 F.3d 168, 186–87 (2d Cir. 2004) (quoting Banque Arabe et
Internationale D’Investissement v. Md. Nat’l Bank, 57 F.3d 146, 153 (2d Cir. 1995)). In
addition, Plaintiffs’ “common law fraud claims are subject to the Rule 9(b) pleading
requirements.” In re Bear Stearns Companies, Inc. Sec., Derivative, & ERISA Litig., 995 F.
Supp. 2d 291, 312 (S.D.N.Y. 2014) (quoting Banque Arabe, 850 F.Supp. 1199, 1221
(S.D.N.Y.1994)), aff’d sub nom. SRM Glob. Master Fund Ltd. P’ship v. Bear Stearns Cos.
L.L.C., 829 F.3d 173 (2d Cir. 2016)). Rule 9(b) requires “that a complaint ‘(1) specify the
statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where
and when the statements were made, and (4) explain why the statements were fraudulent.’”
Rombach v. Chang, 355 F.3d 164, 170 (2d Cir. 2004) (quoting Mills v. Polar Molecular Corp.,
12 F.3d 1170, 1175 (2d Cir. 1993)).
“While the circumstances of fraud must be pleaded specifically, fraudulent intent may be
averred generally, as long as the complaint provides a factual basis that gives rise to a strong
17
inference of intent to defraud, knowledge of the falsity, or a reckless disregard for the truth.”
Trs. of Plumbers & Pipefitters Nat. Pension Fund v. De-Con Mech. Contractors, Inc., 896 F.
Supp. 342, 346–47 (S.D.N.Y. 1995). “The requisite ‘strong inference’ of fraud may be
established either (a) by alleging facts to show that defendants had both motive and opportunity
to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of
conscious misbehavior or recklessness.” Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128
(2d Cir. 1994) (citing In re Time Warner Inc. Sec. Litig., 9 F.3d 259, 268–69 (2d Cir. 1993)).
B.
Discussion
1.
Count I: Common Law Fraud
Plaintiffs’ complaint adequately states a claim for common law fraud under New York
law. First, it alleges that specific false representations about Eco-Fuel’s efficacy were made on
June 5, 2014, when Ford sent Plaintiffs the Eco-Fuel patent. (Compl. ¶ 9.) It further alleges that
subsequent testing revealed the falsity of these representations. (Id. ¶¶ 18–19.) Second, it
identifies another specific fraudulent statement about the existence of foreign markets for EcoFuel, which were made by Ford and his associate, Ernie Park, at the July 4, 2014, meeting at
Plaintiffs’ attorney’s office in New York City. (Id. ¶ 13.) Similarly, it alleges that, on November
9, 2014, Ford provided Plaintiffs with the “Master List” of existing and prospective foreign
business opportunities for distributing Eco-Fuel. (Id. ¶ 15.) According to Plaintiffs, their
representative later confirmed that no such established markets existed. 11 (Id. ¶ 13.)
11
Plaintiffs also claim that each and every one of Ford’s representations that he
owned Eco-Fuel and could sell the rights to its distribution to Plaintiffs were knowingly false.
(Compl. ¶ 20.) They allege that Ford had previously sold the worldwide distribution rights to
another corporation prior to entering into negotiations with Plaintiffs, and that this prior sale led
to a separate lawsuit in Canada. (Id.) This particular misrepresentation, however, is not alleged
with adequate specificity. Plaintiffs do not identify a specific time or place where Ford made
such a misrepresentation about the nature of his ownership interest in the distribution rights.
18
These allegations adequately identify the “who, what, where, when and why” of the
allegedly fraudulent statements, so as to provide Ford sufficient notice of Plaintiffs’ claims.
Jovel v. i-Health, Inc., No. 12–CV–5614, 2013 WL 5437065, at *11 (E.D.N.Y. Sept. 27, 2013).
“Rule 9(b) generally requires that a plaintiff specify . . . which statements were fraudulent and
why, who made the statements to whom, and when and where the statements were made.” Id.;
accord O’Brien v. Nat’l Prop. Analysts Partners, 936 F.2d 674, 676 (2d Cir. 1991) (“The
purpose of Rule 9(b) is threefold—it is designed to provide a defendant with fair notice of a
plaintiff’s claim, to safeguard a defendant’s reputation from ‘improvident charges of
wrongdoing,’ and to protect a defendant against the institution of a strike suit.” (quoting Ross v.
Bolton, 904 F.2d 819, 823 (2d Cir. 1990))); In re Ford Fusion & C-Max Fuel Econ. Litig., No.
13 Md. 2450, 2015 WL 7018369, at *12 (S.D.N.Y. Nov. 12, 2015) (citing Jovel, 2013 WL
5437065, at *11).
Plaintiffs also adequately allege the remaining elements of common law fraud: scienter,
justifiable reliance, and damages. With respect to scienter, the allegations in the complaint,
when taken as true, permit the inference that Ford either knowingly or recklessly misrepresented
the effectiveness of Eco-Fuel. The complaint establishes that Ford repeatedly represented (in his
patent, for example) that Eco-Fuel effectively improved fuel efficiency and reduced emissions.
(Compl. ¶¶ 8, 9.) The allegations also establish that Ford failed to make available to Plaintiffs
either testing reports verifying these claims or existing distribution agreements, despite
Plaintiffs’ repeated demands for such documentation and Ford’s promise to provide it in the
Option Agreement. (Id. ¶¶ 12, 17; Option Agreement at 4.) This alleged conduct provides
Nonetheless, Plaintiffs’ fraud claim survives the motion to dismiss on the basis of the other,
adequately pleaded misrepresentations.
19
sufficiently strong evidence that Ford did not have any such reports or distribution agreements,
and that he knowingly misrepresented the efficacy of Eco-Fuel and the existence of foreign
distribution markets to Plaintiffs.
Plaintiffs’ allegations are likewise sufficient to establish justifiable reliance, despite
Ford’s argument to the contrary. Ford contends that Plaintiffs are sophisticated investors who
essentially failed to exercise due diligence before entering into the Option Agreement. (Dkt. No.
17 at 8–10.)
“Reliance, which is a crucial element of any fraud claim, must be justifiable under the
circumstances.” SKR Res., Inc. v. Players Sports, Inc., 938 F. Supp. 235, 240 (S.D.N.Y. 1996).
“Courts have repeatedly rejected claims of justifiable reliance where the representation relates to
matters not peculiarly within the Defendant’s knowledge and the Plaintiff ‘has the means of
knowing, by the exercise of ordinary intelligence, the truth, or the real quality of the subject of
the representation.’” Id. (quoting Mallis v. Bankers Tr., 615 F.2d 68, 80–81 (2d Cir. 1980)).
Under New York law, “a sophisticated plaintiff cannot establish that it entered into an arm’s
length transaction in justifiable reliance on alleged misrepresentations if that plaintiff failed to
make use of the means of verification that were available to it, such as reviewing the files of the
other parties.” UST Private Equity Inv’rs Fund, Inc. v. Salomon Smith Barney, 733 N.Y.S.2d
385, 386 (N.Y. App. Div. 1st Dep’t 2001).
In other words, “a plaintiff suing for fraud (and particularly a sophisticated plaintiff . . .)
must establish that it ‘has taken reasonable steps to protect itself against deception.’” Basis Yield
Alpha Fund Master v. Stanley, 23 N.Y.S.3d 50, 55 (N.Y. App. Div. 1st Dep’t 2015) (quoting
DDJ Mgmt., LLC v. Rhone Grp. L.L.C., 15 N.Y.3d 147, 154 (2010)). The ultimate question is
whether, in light of the circumstances, a plaintiff has exercised due diligence. See Miller v. Icon
20
Grp. LLC, 911 N.Y.S.2d 3, 4–5 (N.Y. App. Div. 1st Dep’t 2010) (“Defendant, a sophisticated
real estate entity represented by counsel, could not establish justifiable reliance since it did not
undertake due diligence concerning a matter it regarded as essential to the transaction and was
not peculiarly within its knowledge.”). “Under New York’s contextual approach, ‘[t]he question
of what constitutes reasonable reliance is always nettlesome because it is so fact-intensive.’” De
Sole v. Knoedler Gallery, LLC, 139 F. Supp. 3d 618, 643 (S.D.N.Y. 2015) (alteration in original)
(quoting DDJ Mgmt., 15 N.Y.3d at 155). “[R]easonable reliance is therefore a question normally
reserved for the finder of fact and not usually amenable to summary judgment.” Id. (alteration in
original) (quoting Coraud LLC v. Kidville Franchise Co., 121 F. Supp. 3d 387, 394 (S.D.N.Y.
2015)) (internal quotation marks omitted).
Here, the Plaintiffs adequately allege that, although they are sophisticated, they did not
fail to exercise due diligence. First, the contents of any testing reports about Eco-Fuel’s efficacy
and the existence of distribution networks for the product were “peculiarly within the
Defendant’s knowledge,” as the inventor of the product. See SKR Res., 938 F. Supp. at 240.
Second, under the terms of the Option Agreement, Ford promised to provide such reports and
agreements. (Option Agreement at 4.) When they executed the Option Agreement, as alleged in
the complaint, Plaintiffs had no reason to believe that such documentation did not exist, and they
justifiably relied on Ford’s representations, especially those in the Eco-Fuel patent. (Compl.
¶ 9). See Fed. Hous. Fin. Agency v. JPMorgan Chase & Co., 902 F. Supp. 2d 476, 496
(S.D.N.Y. 2012) (“[E]ven sophisticated plaintiffs are not required as a matter of law to ‘conduct
their own audit’ or ‘subject [their counterparties] to detailed questioning’ where they have
21
bargained for representations of truthfulness.” (second alteration in original) (quoting DDJ
Mgmt., 15 N.Y.3d at 148)). 12
Plaintiffs may be sophisticated investors, but that does not make them sophisticated
engineers. Ford does not identify any available “means of verification” of which Plaintiffs failed
to avail themselves. See De Sole, 139 F. Supp. 3d at 643 (quoting ACA Galleries, Inc. v. Kinney,
928 F. Supp. 2d 699, 703 (S.D.N.Y. 2013)). Viewing the alleged facts in the light most
favorable to Plaintiffs, the Court concludes that they justifiably relied on Ford’s alleged
misrepresentations. 13
2.
Count II: Unjust Enrichment
“The basic elements of an unjust enrichment claim in New York require proof that (1)
defendant was enriched, (2) at plaintiff’s expense, and (3) equity and good conscience militate
against permitting defendant to retain what plaintiff is seeking to recover.” Briarpatch Ltd., L.P
v. Phoenix Pictures, Inc., 373 F.3d 296, 306 (2d Cir. 2004). “New York courts ‘look to see if a
benefit has been conferred on the defendant under mistake of fact or law, if the benefit still
remains with the defendant, if there has been otherwise a change of position by the defendant,
and whether the defendant’s conduct was tortious or fraudulent.’” MCM Prods. USA, Inc. v.
Botton, No. 16 Civ. 1616, 2016 WL 5107044, at *8 (S.D.N.Y. Sept. 19, 2016) (quoting
Paramount Film Distrib. Corp. v. State, 30 N.Y.2d 415, 421 (1972)).
12
Of course, Plaintiffs’ bargained-for right to disclosure of truthful information
from Ford applies only to representations that occurred after execution of the Option Agreement.
Nonetheless, the Court concludes that the Plaintiffs have adequately pleaded justifiable reliance
as to the pre-execution fraudulent misstatements as well, for the reasons given above.
13
Plaintiffs also adequately allege damages, the final element of a fraud claim.
They claim to have expended $300,000 to purchase the option to exclusively negotiate for the
rights to Eco-Fuel, $200,000 in additional costs in preparation to bring the produce to market,
and $40,000 more in an advance payment to Ford. (Compl. ¶¶ 11, 14, 16.) Ford does not
contend that damages are not adequately alleged.
22
Here, all three elements are sufficiently alleged. Plaintiffs claim to have paid $540,000 to
Ford. (Compl. at 7). Assuming the truth of Plaintiff’s allegations of fraudulent
misrepresentations, “equity and good conscience militate against permitting defendant to retain”
these funds. See MCM, 2016 WL 5107044, at *8.
The motion to dismiss for failure to state a claim is denied. 14
VII.
Conclusion
For the foregoing reasons, Defendant’s motion to dismiss is DENIED. Defendant shall
file an answer to the complaint on or before October 5, 2017.
The Clerk of Court is directed to close the motion at Docket Number 10.
SO ORDERED.
Dated: September 15, 2017
New York, New York
____________________________________
J. PAUL OETKEN
United States District Judge
14
Ford’s statute of limitations argument is meritless. (Dkt. No. 11 at 21‒22.) He
claims that the statute of limitations is “two years from the time the plaintiff . . . discovered the
fraud, or could with reasonable diligence have discovered it.” (Id. at 21) (emphasis in original)
(quoting N.Y. CPLR § 213(8)). As Plaintiffs point out, however, Ford’s position wholly ignores
the complete text of the statute, which provides that, for “an action based upon fraud”:
the time within which the action must be commenced shall be the greater of six
years from the date the cause of action accrued or two years from the time the
plaintiff or the person under whom the plaintiff claims discovered the fraud, or
could with reasonable diligence have discovered it.
N.Y. CPLR § 213(8) (emphasis added). Because the alleged fraud began in 2014, Plaintiffs’
claims are timely. (See Dkt. No. 12 at 13–14.)
23

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